2017 (6) TMI 353 - HC - Income Tax

Addition on account of unutilized revenue grant - deemed income as referred u/s.11(1) of the Act? Held that - As decided in CIT Versus Gujarat Safai Kamdar Vikas Nigam 2011 (5) TMI 815 - Gujarat High Court adetailed provisions were made for allotment of funds to the respondent assessee. It was a scheme envisaged for implementation of certain Government programmes in particular, to uplift the living condition of manual scavengers and other Safai Kamdars involved in similar activities. The assessee Corporation was not sole trustee. The Scheduled Caste Development Board was also liable for implementation of the scheme to be supervised by a Committee headed by the Deputy Minister which included other Government officials. To our mind, the Tribunal committed no error in holding that the grant in question fulfills the requirement of section 11(d)(1) read with section 12(1) of the Act. - Decided against revenue

Summary

Issues:
1. Whether the ITAT erred in upholding the order of CIT (A) deleting the addition made by the A.O. on account of unutilized revenue grant?

Analysis:
The High Court considered the appeal against the ITAT judgment regarding the addition of a revenue grant. The Court referred to a previous case with similar facts involving a Government corporation receiving a grant and claiming exemption under section 11(1)(d) of the Income Tax Act, 1961. The Court noted that the Tribunal allowed the appeal in the previous case, holding that the corporation was entitled to claim exemption under the relevant sections of the Act. The Revenue contended that the Tribunal erred in granting the benefit without a specific direction in the Government circular regarding the grant forming the corpus of the corporation. However, after examining the documents and the scheme under which the grant was made, the Court found that the grant was disbursed for a specific purpose and to be utilized accordingly. The Court highlighted the objectives of the corporation, which included promoting economic activities for the benefit of certain groups. The resolution granting the funds emphasized the rehabilitation of manual scavengers and sweepers. The Court concluded that the funds were meant for implementing the scheme to uplift the living conditions of the targeted groups, and the Tribunal did not err in granting the exemption. Therefore, the Court dismissed the Tax Appeal.

In conclusion, the High Court upheld the ITAT decision to allow the corporation to claim exemption under section 11(1)(d) of the Income Tax Act, 1961, regarding the revenue grant received. The Court found that the grant was intended for specific purposes outlined in the scheme to uplift certain marginalized groups, and the Tribunal's decision was justified based on the scheme's objectives and the corporation's role in implementing the program. The Court emphasized the detailed provisions made for fund allocation and the overall purpose of the scheme in determining that the grant fulfilled the requirements for exemption under the relevant sections of the Act. Consequently, the Tax Appeal was dismissed.